HONG KONG, 22 Feb 2026 – China’s stock markets are bucking a global downturn driven by AI-related risk aversion in the U.S., with investors in the Mainland and Hong Kong actively chasing leading artificial intelligence plays instead of retreating from the sector.
While “AI scare trade” sentiment, where investors sell off tech and software names amid concerns about disruption and excessive valuations, has taken hold in the United States, China’s market mood remains markedly upbeat, focused on stocks that stand to benefit directly from AI growth.
China’s AI Rally Stands Out Amid Global Caution
In the U.S., fears that rapid advances in AI could erode traditional business models have triggered profit-taking and selective selling across technology and software sectors. In contrast, Chinese investors are taking a “growth-first” approach, targeting companies at the forefront of AI model development and large language model innovation.
This divergence highlights how regional market psychology is shaping capital flows:
- Chinese AI start-ups and pure-play AI names are among the most actively bought, drawing investor interest despite broader equity risk aversion.
- Stocks such as Z.ai and MiniMax Group Inc., both newly listed in Hong Kong, have seen significant gains, with some rallies extending into double-digit multiples over recent sessions.
- Analyst upgrades and bullish coverage from major banks, including Morgan Stanley and Jefferies, are fuelling optimism in select AI names that deliver tangible product upgrades and user adoption.
One key reason for the divergence is China’s distinct AI market structure, where many AI developers operate in a relatively captive domestic ecosystem with limited foreign competition, and local models are tailored to home-market requirements. That competitive insulation has helped local investors focus on penetration and growth prospects, rather than disruption risk.
Investor Sentiment: Growth Over Fear
Financial strategists say the difference in behaviour reflects fundamental contrasts in how AI’s impact is perceived:
- In the U.S., AI fears have spurred a selloff in segments exposed to disruption risk, probation of overvaluation and concerns about profit margin erosion.
- In China, investors are embracing AI as a growth driver, favouring companies with credible technology roadmaps, model differentiation and scalable business prospects.
This rally is also supported by broader Asia-Pacific demand for capital in technology and innovation sectors, where Chinese and regional equities have outperformed some Western markets in 2026.
Market Implications for Asia and Beyond
China’s divergence from the global AI scare narrative has broader implications for markets across Asia:
- It may attract foreign capital flows into Chinese and Asian AI battery stocks as global funds rotate into high-growth themes.
- Regional benchmarks could outperform as investors seek growth over defensive positioning during periods of AI uncertainty.
- Technology supply chains, from models to semiconductors, may see differentiated investment priorities, favouring markets with strong domestic AI traction.
However, some analysts caution that valuation risks may rise if earnings growth fails to justify optimism or if investor focus becomes overly concentrated on only a handful of AI winners rather than broader fundamentals.
